Spreadex Market Update
Dollar At Highs Ahead of CPI Today, BOC In Focus Also
The US Dollar is sitting at highs ahead of today’s June CPI release. Despite initial strength yesterday, the greenback was unable to mark a fresh breakout with sellers stepping in to see the Dollar pause at current highs. Today’s CPI release will be make or break for the Dollar; a further strong CPI release will no doubt fuel a fresh round of USD buying, keeping the focus on continued Fed tightening beyond July. Alternatively, if CPI undershoots expectations, this will no doubt raise debate around the potential for a post-July slowdown in rates, creating a drag on USD near-term.
Key Factors for Today
- USD holding near highs ahead of today’s CPI release
- Equities a little firmer today, vulnerable to data-volatility today
- GBP rallies on hawkish BOE comments, JPY softer on reduced safe-haven flows
- Gold and silver hold near lows
- Oil bounces back following sharp drop yesterday
Coming Up
- EUR German ZEW Economic sentiment
- GBP BOE’s Bailey speaks
- USD US NFIB Small business index
Risk Sentiment Rebounds Amidst USD Softness
Investor risk appetite remains mixed across the European open on Wednesday. With the US Dollar still higher on the week, most indices are trading lower against their weekly open. Failure by the US Dollar to follow through on initial strength has allowed some indices to rebound, however, though today’s CPI data has the potential to undo this strength. If USD is seen higher in response to a better-than-expected CPI reading today, equities will no doubt head lower near-term.
GBP Rallies on Hawkish Bailey Comments
In FX, we’ve seen a reversal in recent moves with the British Pound the best performing currency over late Asian and early European trading on Wednesday. GBP has been driven higher by comments from BOE’s Bailey yesterday who warned that the BOE will do whatever it takes to bring inflation down. Bailey’s comments were taken as a greenlight for aggressive BOE action, effectively squashing any suggestion that the BOE might look to avoid heavily lifting rates. JPY has been the worst performer again so far today. With USD pausing and equities markets rebounding, albeit lightly so, JPY has seen reduced safe-haven demand.
BOC In Focus Today
Today’s BOC meeting will be the other key data event. The BOC is widely expected to mark a fresh 50bps rate hike with traders keen to see the bank’s latest outlook. If hawkish signals remain going forward, CAD should be stronger on the back of the meeting. If there is any mention of a pause or slowdown in rate increases, this will likely see CAD soften.
Gold & Silver Pause Near Lows
Gold and silver prices are both sitting near lows as of the European open on Wednesday. Gold prices are in the red so far today, while silver is seeing better demand. However, both metals are vulnerable to further losses should today’s US CPI reading come in above expectations, fuelling a fresh USD. Alternatively, any post-data USD weakness today might allow metals room to recover near-term.
Oil Bounces Back Following Sharp Drop Yesterday – EIA Release Next
Oil prices are back in the green today as crude futures rebound off the lows following a more than 9% drop yesterday. A surprise surplus in yesterday’s API report weighed on oil prices as traders grapple with growing recessionary risks, China lockdown fears and general demand concerns. Traders are now waiting on today’s EIA release which is forecast to mark a drawdown of around 1.5 million barrels.
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